Keystone XL’s fate now squarely in the hands of U.S. State Department

The fate of TransCanada’s controversial Keystone XL pipeline was put squarely in the hands of the U.S. State Department on Tuesday after Nebraska’s governor approved a new route amid fierce opposition from environmental groups.

Nebraska Gov. Dave Heineman sent a letter to U.S. President Barack Obama confirming that he would allow the Alberta-to-Texas oil pipeline to go through his state along a revised route that skirts an environmentally sensitive area.

Because the Keystone XL would cross an international border, it requires approval from the U.S. State Department and President Barack Obama.

The $7-billion project would carry bitumen extracted from Alberta’s oilsands to refineries along the U.S. Gulf Coast.

Some critics of Keystone see it as an environmental threat and symbolic of a wrong-headed energy policy, both because of potential oil spills and because of the amount of carbon released by the oilsands extraction process.

The project has faced some of its strongest resistance in Nebraska from a coalition of landowners and environmental groups who say it would contaminate the Ogallala aquifer, a massive groundwater supply.

Calgary-based pipeline giant TransCanada, which operates throughout Canada and the United States, and some workers’ unions say the project is safe and will create thousands of jobs.

The original route would have run the pipeline through a region of erodible, grass-covered sand dunes. The new route skirts that area, although the pipeline’s most vocal critics remain firmly opposed to it as well.

TransCanada says the Nebraska governor’s approval brings the United States one step closer to “enhanced energy security.”

“The need for Keystone XL continues to grow stronger as North American oil production increases and having the right infrastructure in place is critical to meet the goal of reducing dependence on foreign oil,” TransCanada president and CEO Russ Girling said in a statement.

“Keystone XL is the most studied cross-border pipeline ever proposed, and it remains in America’s national interests to approve a pipeline that will have a minimal impact on the environment.”

While the issue now goes to the State Department, Senator John Kerry has provided no clues about Keystone’s prospects since being tapped by the Obama administration as Hillary Clinton’s replacement as head of the State department.

Kerry is expected to breeze through his U.S. Senate confirmation hearings later this week to become America’s next top diplomat, one whose devotion to environmental issues has been making proponents of Keystone XL nervous.

The legislator has long been one of the most fierce environmentalists on Capitol Hill, leading unsuccessful efforts three years ago to push greenhouse gas legislation through Congress.

Last week, The Canadian Press reported that Kerry _ the unsuccessful Democrat candidate in the 2004 presidential election _ owns stock in two Canadian oil companies that have pushed for approval of Keystone XL _ Suncor (TSX:SU) and Cenovus Energy (TSX:CVE).

Kerry’s office said those investments were in a blind trust. But the lawmaker will likely have to divest of them following an ongoing federal ethics review that is standard procedure for would-be U.S.
cabinet secretaries.

Gov. Heineman said previously that he would oppose any pipeline route through the Sandhills region. In his letter to Obama, he said the new 320-kilometre route through Nebraska avoids the Sandhills but would still cross part of the aquifer. Heineman said any spills would be localized, and the clean-up responsibilities would fall to TransCanada.

The governor said the project would result in US$418.1 million in economic benefits for the state and $16.5 million in taxes from the pipeline construction materials.

Jane Kleeb, executive director of the group Bold Nebraska, says Heineman’s decision is “one of the biggest flip-flops in Nebraska history.